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 * Personal Finance
 * Start Investing

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How to Start Investing


WHY START INVESTING NOW?

IF YOU’VE GOT MONEY, YOU CAN MAKE IT WORK FOR YOU. HERE’S THE BEST PART: YOU
DON’T NEED A LOT TO START, AND GETTING AN EARLY START CAN MAKE A MASSIVE
DIFFERENCE.


INVESTING CAN GIVE YOU FINANCIAL FREEDOM.

Investing can have a big positive impact on your quality of life.

When you invest, you buy things like stocks, bonds and real estate with the
expectation that when you sell them, you’ll have more money.

Investing is a way to put your money to work for you, even while you’re off
doing something else.

INVEST EARLY AND REAP THE REWARDS.

The key to building financial strength through investing is to start as early as
possible and stick with it. Another important factor is choosing investments
that fit your needs.

Think about your big picture goals: Maybe you want to start your own business,
travel the world or retire early. Investing early can help you achieve those
goals!



FINANCIAL INDEPENDENCE MEANS LIVING YOUR BEST LIFE.

Investing can bring many benefits. First, it can help ensure that you don’t run
out of money, particularly in your retirement years after you stop receiving
income from your job.

Many studies conclude that Social Security retirement benefits won’t be enough
to maintain a person’s standard of living in retirement. A separate retirement
account can make up most—if not all—of any shortfall.

Investing can help you amass enough wealth to enable you to live off the money
in your accounts. Think of it. No more job, unless you want it. No more
wondering if you’ll have enough money to pay your bills at the end of the month.


THE ELEMENTS OF INVESTING

THE MIRACLE OF COMPOUNDING INTEREST

The beauty of investing is that even a small account can grow to a large pile of
cash in time to make a big difference in how you live your life.

That’s because of the miracle of compounding interest. It’s simple but powerful:
With 10% interest, $100 grows to $110 the first year. In the second year,
assuming you don’t take money from your account and you continue to earn 10%
interest, that $110 grows to $121.

Each year you earn interest on the new, usually higher balance. Since most years
the stock market goes up, that means you’ll be earning interest on a higher
balance. In the table below you can see that if you start with $100, after 10
years earning an average annual 10%, your account will grow to $259—more than
doubling. Start with $10,000 and you’d end with $25,937.


HOW MUCH WOULD YOU HAVE IF YOU START INVESTING EARLY?

Look at what would have happened if you had invested $10,000 in the S&P 500
stock market index five, 10 or 20 years ago.




When you’ve got time on your side, you don’t need to start with a lot.


INFLATION MEANS YOUR MONEY IS LOSING VALUE WHEN NOT INVESTED.

 * Inflation is a general rise in prices and a drop in the purchasing power of
   money.

 * For example, say the $100 you have in your bank account today can buy 20 cups
   of coffee. But next year $100 might be able to buy only 19 cups of coffee.
   That’s the effect inflation has on the prices of things you buy. The
   purchasing power of your money has dropped.

 * Inflation is common, with rates varying over time. But a lifetime of even a
   little inflation can take big chunks of value out of your money.


WANT TO BEAT INFLATION?

 * In the past 10 years, the S&P 500 stock index, which represents big,
   high-quality companies, rose at an average annual rate of 13.88%. At that
   rate, an investment of $10,000 would have grown to $36,683.82. But adjusted
   for inflation, the purchasing power would be just $30,947.74.

 * Inflation is an even bigger drag on investments that earn a lower rate of
   return. Like most types of bonds over the long haul, long-term government
   bonds produced lower returns than stocks in the past 10 years. They grew at
   an average annual rate of 7.16% -- nearly half the rate of stocks. A $10,000
   investment would have grown to $19,967.65. Inflation would have cut the
   purchasing power to just $16,936.28.

 * The best way to offset the effects of inflation is to invest in assets that
   have a higher return than inflation.

Learn more about the inflation rate and its impact on the U.S. economy.


SAVING VS. INVESTING




SAVING

Savings go into bank accounts, CDs and money markets where you don’t earn a lot
but there’s little chance the value of your account will fluctuate much.

Savings are for rainy days, emergency spending and money you’ll need in the next
one to five years.

You need to count on it being there in the near future.

Learn more about savings accounts in the personal finance lesson pages.


INVESTING

Investments should be made with money you don’t plan to spend for five or more
years.

Ideally, that money should go into the stock market and other areas where you
can earn a higher rate of return.

While the stock market has historically fluctuated more than savings in the
near-term, it has provided significantly higher returns than savings in the long
run.

DON'T INVEST TOO LITTLE

A common money mistake is keeping too much money in savings and not enough in
investments.

By doing so, you miss the opportunity of having your money work much harder for
you over a long period of time.

Let’s compare what would have happened if you put $10,000 in an average savings
account or the stock market over the past 10 years.

What $10000 invested for 10 years in an average savings account and the S&P 500
stock index would have grown as of 12/31/2020
Learn more about savings accounts


KEY POINTS

1

The earlier you start investing, the faster you can grow your money and make it
work for you.

2

Inflation means your money is losing value when it’s not invested.

3

Saving and investing are different. It’s important to do both, for money you may
need in the near future (savings) and in the long term (investing).

Read more on How to start Investing

 * Why Start Investing
 * Types of Investments
 * What is the Stock Market?
 * How to Trade Stocks
 * What Makes a Great Stock
 * How to Read a Stock Chart
 * Stock Market Myth vs Facts
 * How to Get Started

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MORE ON INTRO TO INVESTING

WHY START INVESTING NOW

If you’ve got money, you can make it work for you. Here’s the best part: you
don’t need a lot to start, and getting an early start can make a massive
difference.

TYPES OF INVESTMENTS

Where can you stash your money, aside from a shoebox under the mattress? These
are the most common ways to invest and grow your funds.

WHAT IS THE STOCK MARKET?

Bulls, bears and big banks: It’s all part of the rich stew that is the stock
market. Here’s an intro to how it works and the lingo to know.

HOW TO TRADE STOCKS

Buy, sell or hold? Trading stocks is how you make money in the market, and we’ll
show you how it’s done.

WHAT MAKES A GREAT STOCK?

There’s an old saying: All stocks are bad unless they go up. We hit the books
and found 5 things that the biggest stock market winners have in common.

HOW TO READ A STOCK CHART

Got 10 minutes? Then you can learn to read stock charts and give yourself a
massive edge when you’re investing.

STOCK MARKET: MYTHS VS. FACTS

The stock market has more myths than ancient Greece. We’ll use research and
facts to debunk the 6 most common ones.

HOW TO GET STARTED

Now that you’ve learned about the stock market and trading, interested in trying
it out? Here’s your guide to jumping in.

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